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Mortgage Rates Got You Down? R-E-L-A-X...

Yesterday morning the inflation report came out and we are now up 7.5% over last year. That caused the bond market to worsen by over 80 basis points, which translates to roughly a quarter percent higher interest rates. While that's not fun for any of us, I want to pause and encourage all of us to...in the words of one of my least favorite NFL quarterbacks...R-E-L-A-X.

It helps to have some historical perspective - when mortgage rates were in the low 4's in 2019, but that was down from roughly 5% just 4 months earlier, it felt like heaven. The same rates today in the low 4's, coming up from the low 3's, feel like hell. But the reality is just that the special pandemic time is over, and we're back to where, on average, we usually are.

Over the last decade Freddie Mac reports the average 30-year mortgage rate was in the high 3's. We're not far from that right now. The decade prior, the average 30-year mortgage rate was over 5.5%.

It turns out the Fed has been stimulating the economy for far longer than they should have and now find themselves far behind the curve, and it's a painful adjustment, but one that if you really think about it shouldn't be taking people by surprise.

If you're a fan of low rates, there's one silver lining - the last time inflation in the US fell from above 5% to below it without soon thereafter having a recession was over 70 years ago. It's quite possible that the Fed's late but expected actions help trigger a drop in inflation that reduces mortgage rates again in the foreseeable future.